National Insurance Contributions (Rate Ceilings) Bill (Second sitting)
Rebecca Long Bailey Excerpts(10 years, 3 months ago)
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Mr Gauke
Like clause 1, clause 2 is a simple provision and I do not intend to detain the Committee for long in explaining it. The rate of secondary class 1 contributions payable by employers for employees who are not under the age of 21 is 13.8%. It is payable on earnings above £156 per week. The clause simply provides that the rate shall not exceed 13.8%.
Rebecca Long Bailey (Salford and Eccles) (Lab)
Again, as this is part of the Government’s policy to cap national insurance contributions for this Parliament, we do not oppose it in principle, but I hope that the Minister will address a few issues.
The national insurance fund is used almost exclusively to pay for contributory benefits. However, one portion, as we discussed this morning in the evidence session, is used for the NHS. Will the Minister assure us that the Government are not tying their own hands should there be another economic crisis? There could be a danger in such circumstances that the Chancellor may decide to reduce public spending further, just at the point when a stimulus is needed.
Economists the world over warn that the global economic situation is becoming increasingly precarious, and the Minister will no doubt be acutely aware that the Opposition have concerns that the Government are not taking sufficient measures to increase our financial resilience. I ask the Minister, in the words of Keynes: if the facts change, will the Chancellor change his mind? Alternatively, if the Government are committed to keeping this framework in place regardless, what contingency plans exist to protect the fund if unemployment starts to rise and receipts from national insurance consequently fall?
On Second Reading, the point was made that the Chancellor’s spending plans are predicated on,
“a forecast rise in revenue yield from NICs”.—[Official Report, 15 September 2015; Vol. 599, c. 941.]
However, should this yield be less than forecast, whether due to unforeseen circumstances, simple miscalculation or, indeed, economic policy failures, what will the Government do? Will further cuts be imposed on public expenditure, or will borrowing rise and the Chancellor simply change his targets once again?
I was grateful for the Minister’s response this morning when he confirmed that NHS funding would not be cut directly as a result of any impact that the Bill has. However, in the same way as the Bill provides an assurance to the market that the Government will keep their promise on national insurance, it would be prudent to legislate for the promise on the NHS. I trust that the Minister has listened diligently to my concerns and I look forward to his response.
Mr Gauke
I am grateful to the hon. Lady for her questions. She asked whether we are tying our hands in these circumstances. To the extent that we are not putting up the employers’ rate of national insurance contributions, for which the clause provides, or the employees’ rate, for which clause 1 provides, we are making it clear that we do not believe that that would be the right thing to do.
The hon. Lady draws me on to hypothetical ground when she asks what would happen if there were a crash, but even on a Keynesian analysis, I do not think anyone would particularly advocate, as an immediate response to an economic downturn, increasing employers’ or employees’ national insurance contributions. I do not claim to be an expert on Keynesian orthodoxy, but I do not think that that would constitute an orthodox Keynesian response to a downturn.
On the hon. Lady’s points about the impact on the national insurance fund, let me repeat the assurances that I gave this morning. There is no question of the fund not being able to fund pensions or the NHS. The Government will introduce the new state pension from 2016, which will make pensions affordable and improve the sustainability of the national insurance fund in the long term and provide the right support for private saving.
The Government Actuary recommends a working balance of one sixth of benefit expenditure for the national insurance fund, as we heard this morning. There is provision to top up the national insurance fund from the Consolidated Fund to maintain the balance at that level. For the 2015-16 tax year, a top-up of £9.6 billion has been provided for in legislation. The future funding of contributory benefits, should NICs receipts prove insufficient, is a matter for the Chancellor and that decision would need to be made at the relevant fiscal event, based on the latest projections available at the time, and taking account of this Bill. I hope that that provides some reassurance that there is flexibility.
It is not the case—nor is this an argument that a future Government would make—that, if the national insurance fund were lower than we expected, we would not honour our commitments on the NHS and on the state pension. I have to make the point that, when it comes to ensuring that we can have a properly funded NHS and properly funded pensions, we need to make sure that the economy is on a sound footing, and that the public finances are strong. That means that we have to make choices, and, in some cases, difficult choices about public finances. That includes, for example, identifying savings in the welfare budget, but, Mr Bailey, that would be taking me away from clause 2.
Rebecca Long Bailey
Hon. Members will be pleased to hear that I do not wish to go into great detail on clause 3. We are aware that the clause links the upper earnings limit to the higher rate income tax threshold by setting out that it shall not exceed the weekly equivalent of the proposed higher rate threshold for that tax year. That means that employees stop paying national insurance contributions at the 12% rate when their income reaches the higher rate income threshold, and thereafter the rate of national insurance is 2%.
Mr Gauke
I am sorry if we are detaining the hon. Lady. I am sure she has many useful things to do this afternoon, so I will not detain her longer than I have to. I come back to the point that we debated this morning. It was a manifesto commitment that we would legislate for this and it is similar to the argument on rates that we have just had on clauses 1 and 2. It underlines our commitment.
I suspect that, had the Bill contained just clauses 1 and 2, and not dealt with the upper earnings limit alignment, the hon. Lady would have been one of the first to identify an apparent lacuna in the legislation and would say that there was nothing to stop us increasing the 12% band of national insurance contributions above the point at which the higher rate threshold came into place. Indeed, I think that that was Labour party policy in 1992, so it is not an immaterial issue or one that has never been considered in public debate.
To be consistent with the capping of the employees’ NICs rate, it is right to set out the threshold and the fact that that is tied in with the higher rate threshold. That has been the practice for some years now and we wish to maintain it.
Rebecca Long Bailey
On highlighting a lacuna, several need to be highlighted and we will take the same approach as the Government to the Bill. If they are going to legislate for every single pre-election promise, surely they should apply the same sort of legislation to every manifesto pledge. They are certainly not doing that.
As my hon. Friend the Member for Wolverhampton South West rightly said this morning, while the Government might be providing assurances to the market on this issue, they are certainly not providing any assurances on all their other pre-election promises because they are not legislating for them in the same way.
Mr Gauke
On a point of order, Mr Bailey. I am not sure whether it is appropriate or necessary to make a point of order at this point, but I think I should. I thank you for your guidance over the last 21 minutes. You have demonstrated all the skills we needed this afternoon, and I am grateful for that. I also thank Mr Rosindell for his assistance this morning.
I thank all hon. Members for their participation in our proceedings. They can report back to the Whips that they have served on yet another Bill Committee, and I hope they feel that this has been a day well spent.
I thank the Whips—the Lord Commissioner of Her Majesty’s Treasury, my hon. Friend the Member for Central Devon, and the hon. Member for St Helens North—for their assistance. I also thank Opposition Members, including the Front-Bench spokespeople, the hon. Members for Wolverhampton South West and for Salford and Eccles, for their constructive engagement with the Bill.
This is the second Bill that some of us have completed in recent days. It has taken considerably less time than the Finance Bill, for which I, for one, am very grateful.
May I conclude by thanking the Clerks, the Hansard reporters, the police and the attendants, as well as the officials from Her Majesty’s Revenue and Customs and the Treasury, for their assistance with this short but important Bill? I look forward to discussing these issues again—no doubt at some length—on Third Reading.
Rebecca Long Bailey
Further to that point of order, Mr Bailey. I reiterate the thanks the Minister has expressed. I also thank him for what has, as always, been a lively and engaging debate. It has been a pleasure.
John Mc Nally (Falkirk) (SNP)
Further to that point of order, Mr Bailey. This is the first Bill Committee on which I have sat. May I, too, thank the Minister and the Clerks for taking us through the Bill and for the guidance they have given us? I am equally glad that our proceedings have been quite short and relatively simple to follow and that I could associate them with my constituents back home in Falkirk.
Bill to be reported, without amendment.
Finance Bill
Rebecca Long Bailey Excerpts(10 years, 3 months ago)
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Mr Gauke
I can assure the hon. Gentleman that the Government are talking to the devolved Administrations about exactly how we are going to do that. We are conscious that these are devolved matters, and we are actively engaged with the devolved Administrations.
I hope that the new clauses and amendments to which I referred earlier in the context of the enterprise investment scheme, venture capital trusts, corporation tax instalment payments and restitution interest payments will be able to stand part of the Bill and have the support of the whole House.
Rebecca Long Bailey (Salford and Eccles) (Lab)
It is an honour for me to speak from the Dispatch Box for the first time under your chairmanship, Madam Deputy Speaker, and I hope that this will be the first of many debates in the Chamber with the Financial Secretary to the Treasury.
I shall first speak to the Government’s amendments and new clauses, before speaking to our amendments on vehicle excise duty. On the whole, the Government’s amendments are technical in nature, designed to preserve the integrity of the Bill, to comply with EU law and to close loopholes. On that basis, we broadly support them, but I will make a few comments.
The explanatory notes and impact assessments relating to the measures were only provided by the Government at 11.50 this morning. Given the detailed nature of the proposed changes, that simply does not allow sufficient time for scrutiny. The hon. Member for Hereford and South Herefordshire (Jesse Norman) has already made that point, and KPMG has also voiced its concern, stating:
“It is important…that the Government is seen to follow the process consistently, and provide suitable time for consultation and Parliamentary scrutiny wherever possible: the addition of entirely new measures to the Summer Finance Bill so late in its passage through the Commons…is likely to foster only uncertainty.”
I hope that the Minister will take these concerns into account and ensure that this does not happen again.
New clause 4 will exclude certain contractual activities relating to reserve electricity generating capacity from the scope of venture capital trusts. These proposals are required to comply with EU state aid rules, along with amendments 31 to 45 and 46 to 70. New clause 5 relates to corporation tax instalment payments and corrects a legislative defect that has previously caused uncertainty over how the legislation will apply to accounting periods that run over 1 April 2015.
New clause 6 relates to carried interest and disguised investment management fees. These are technical corrections to clause 40 that are meant to ensure that where carried interest is charged to tax under the capital gains tax code, the full economic gain is brought into charge to tax. This new clause is intended to prevent sums arising to a fund manager as investment management fees or carried interest from being sheltered from tax through arrangements that have the effect that the amounts arise to other persons.
New clause 8 relates to restitution interest payments and introduces a new rate of corporation tax on amounts of restitution interest that may be paid by HMRC under a claim relating to the payment of tax on a mistake of law or the unlawful collection of tax. The interest element of a restitution award will be chargeable to corporation tax at a special rate of 45% instead of the normal 20% rate. We broadly support this measure, but the Minister will be aware of the hostile views that have been expressed by some businesses. He might wish to take this opportunity to respond to some of those views today.
New clause 3 requires the Chancellor to lay a report setting out proposals for amending the law to ensure that no element of the remuneration aid to an investment fund manager may be treated as a capital gain and that such remuneration shall be treated as income for tax purposes. We agree with the general aims of the new clause but we will listen carefully to what the Minister has to say on this issue.
The proposal dealing with vehicle excise duty relates to rates for light passenger vehicles in the UK and considerably flattens them out by introducing a flat-rate excise charge for every vehicle, regardless of carbon dioxide emissions, from 1 April 2017. First-year rates will continue to be determined by a sliding scale, depending on CO2 emissions. For most greener cars, which emit below 120g of CO2 per kilometre, people will now pay VED of up to £160 in the first year, whereas previously they paid nothing—only zero-emission cars will be liable for zero VED. In subsequent years, there will be a flat-rate of VED of £140 a year. Hon. Members will note that this will result in a substantial VED increase for low-emission cars in the first and subsequent years, while there is a substantial reduction for cars that are less carbon-efficient. Previously, VED for subsequent years was banded, with the more polluting cars paying more—up to £505.
Clearly, over time, the approach being taken strongly benefits more polluting cars, which will pay hundreds of pounds a year less, while greener cars, aside from those with zero emissions, will pay about £100 a year more. To put this into perspective, approximately 445 cars are currently in the top least polluting bands and so pay no VED, as they emit less than 100g of CO2 per kilometre, whereas under the proposed changes only 13 will fall into the exempt category. That represents a significant drop. In addition to those proposals, moves are also being made to additionally penalise vehicles priced at over £40,000 and, over time, there will also be a supplementary rate of £310 for the first five years.
A tax on passenger vehicles has been a feature of Government policy since as far back as 1889, but it is important to note that it was the Labour Government in 1999 who introduced bands of VED linked to the levels of CO2 emissions. The measure was designed to encourage the purchase and use of more fuel-efficient and low-emission vehicles, with the aim of lessening the environmental impact of an ever-increasing number of cars on the road. There is broad consensus on both sides of the House that VED reform is needed. Greener, more carbon-efficient vehicles are slowly becoming more commonplace across the UK, and this will undoubtedly have clear implications for VED as a future source of Government revenue. VED bands were set up in 2008, when the average emission was 158g of CO2 per kilometre, whereas the average car now produces 125g of CO2 per kilometre. Many cars therefore pay no VED at all.
Labour Members agree with the Government that this is unsustainable, but we question whether the approach they have taken to address it is pragmatic. We do not agree that increasing the duty paid on low-emission cars while decreasing the duty paid on higher-emission cars is the logical solution. The fact that zero-emission vehicles will continue to be exempt from road tax is welcome, but we are concerned that a flat rate of VED, as outlined in this proposal, will mean that low-emission vehicles will pay £800 to £1,000 more over a seven-year period than they do now, while many high-emission vehicles are expected to pay up to £440 less.
Mark Field
I congratulate the hon. Lady on her debut at the Dispatch Box, and I hope she will be looking across in precisely the same direction for many years to come. Will she give at least some thought to what was said by the Minister, in that there is a delicate balance to be struck here? We are trying not only to encourage people to have low-emission vehicles—this is not just about carbon dioxide, because nitrogen dioxide is increasingly seen as being a problem, although none of this legislation properly addresses that—but to ensure that relatively less well-off people who perhaps have to hang on to a car for many years should not be artificially penalised. Does she not recognise that the balance the Government have tried to put in place is at least a sensible one?
Rebecca Long Bailey
I welcome the right hon. Gentleman’s comments. He is certainly a silver-tongued fox, and I look forward to staring at him from these Benches in the months to come. He raises some important issues. Hopefully, I will address them during my speech.
Rebecca Long Bailey
I wish to make a little progress before I take any further interventions.
Let me cite an example to show the absurdity of the current proposals. Although I appreciate and agree that VED needs to be reformed as it is unsustainable in its present form, the current proposals create the obvious absurdity of a Mitsubishi Outlander plug-in hybrid owing as much VED as a BMW 5 series saloon from year 2. On top of that, many vehicles that harness the latest technological developments tend to be rather expensive and may be hit by the supplementary rates as well as by the higher flat rate. For instance, the Volvo V60 plug-in hybrid estate—a hybrid suitable for families—would have to pay a first-year rate of £320 and a supplementary rate of £450 for five years thereafter despite being at the forefront of low-emission technology.
Sammy Wilson
I think that there is merit in what is proposed in new clause 3, at a time when the tax system is under scrutiny and people feel under pressure. We must look at both the economic and political consequences of tax proposals, because no tax regime can be viewed in isolation from the political context in which it is set. At a time when many people in lower-income groups feel that they are bearing a disproportionate burden, despite paying less tax, loopholes that become apparent should be closed where possible. I would be worried if it was shown that closing such loopholes would have a detrimental impact on the efficient working of the capital markets, but if that is not the case, then I think there is an important reason for closing them.
With regard to the Opposition’s amendment on vehicle excise duty, I must say that I was very surprised by the stance taken by the hon. Member for Salford and Eccles (Rebecca Long Bailey). The one thing that is quite clear in the amendment is that although it might be very green, it is not very fair, with regard to the burden of taxation. It is more likely to impose a higher tax burden on those on lower incomes, who tend to have older cars with higher emissions, so it would be highly regressive.
Rebecca Long Bailey
The average car currently emits 128 grams of CO2 per kilometre, which is actually in the lower band. It is also important to note that these provisions would come into effect from April 2017, so they would not be retrospectively applied—
Madam Deputy Speaker (Mrs Eleanor Laing)
Order. I fully appreciate that it is the hon. Lady’s first time at the Dispatch Box, but—I am not reprimanding her, but merely giving a little hint for future reference—turning her back on the Chair is not acceptable. Even though she wants the hon. Member for East Antrim (Sammy Wilson), who is sitting behind her, to hear what she is saying, she still must face the Chair at all times. [Interruption.] No, she need not apologise, because it is her first time at the Dispatch Box, but she will always get it right in future.
Air Passenger Duty: Regional Airports
Rebecca Long Bailey Excerpts(10 years, 3 months ago)
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Rebecca Long Bailey (Salford and Eccles) (Lab)
It is a pleasure to serve under your chairmanship, Sir David, especially since this is my first speech as shadow Exchequer Secretary to the Treasury. I am pleased to be working with the Financial Secretary to the Treasury today; no doubt we will spar together on other occasions. I offer my thanks and congratulations to the hon. Member for Solihull (Julian Knight) on securing an important debate on a topic that is of concern to me not only in my capacity as shadow Exchequer Secretary, but because my constituency will be affected.
I thank the hon. Members who spoke in the debate. The hon. Member for Central Ayrshire (Dr Whitford) gave a passionate account of the impact that air passenger duty has on her local airport, Prestwick. The hon. Member for Fylde (Mark Menzies) spoke about the plight of Blackpool airport, especially in the light of its closure not so long ago and its struggle to get back on its feet. My hon. Friend the Member for Blackley and Broughton (Graham Stringer) rightly questioned the future viability of APD generally. The hon. Member for Strangford (Jim Shannon) made some important points about how Belfast has suffered in its competition with Dublin airport. The right hon. Member for Meriden (Mrs Spelman) highlighted the fact that the time for debate is now: it is an important issue and we need to get a grip on it quickly. The hon. Member for South Antrim (Danny Kinahan) made some fantastic points relating to Northern Ireland, and there were also fantastic contributions from the hon. Members for Kilmarnock and Loudoun (Alan Brown) and for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry).
Air passenger duty was highlighted in recommendations by the Smith commission. I reiterate my party’s support for the implementation of the commission’s recommendations as set out in the Scotland Bill. Inevitably, that will have consequences, but that should not undermine the principle of devolution for Scotland, and indeed Wales and Northern Ireland. That said, we cannot escape the fact that the Scottish Government’s anticipated reduction of air passenger duty by 50% in the next five years and their intention to abolish it altogether when finances allow are predicted to have a significant effect on regional airports in England, especially those close to the border. HMRC research conducted in 2012 suggested that the number of passengers using Newcastle airport would decline by 10% the short term, and that Manchester, the closest airport to my constituency, would lose almost 5%.
My hon. Friend the Member for Blackley and Broughton, whose constituency neighbours mine, cited evidence in a previous debate on this issue that if one easyJet and one Ryanair flight were moved from Manchester to Glasgow, the Treasury would lose £2.9 million and 450 jobs would be lost in Manchester. That is of course a forecast, but we can already see the effects of variable rates of air passenger duty by examining the situation in Northern Ireland. Belfast International has suggested that it loses between 570,000 and 1.5 million passengers a year to Dublin airport, where no APD is levied. Dublin airport has run a marketing campaign specifically targeted at attracting Northern Ireland passengers, and in 2013 the number of passengers from Northern Ireland using Dublin airport increased by 12%. With the possibility of powers to determine APD rates being devolved to Wales in due course, the issue is set to have an impact not only on airports in the north of England, but on those in the south-west.
Jonathan Edwards
As the hon. Lady has mentioned my beloved homeland, will she confirm that it is now the policy of the Labour party to support the devolution of APD to Wales? Previously—I appreciate that it was before the hon. Lady was elected to the House—the Labour party abstained on such votes on Finance Bills. I should be grateful for clarification, because that would be quite a shift in her party’s policy.
Rebecca Long Bailey
I shall come on to my party’s position in due course.
I was saying that the possibility of powers to determine APD being devolved to Wales could lead to an impact on airports in the north of England and the south-west. York Aviation has predicted that, with Cardiff airport no longer subject to air passenger duty, Bristol airport would lose 440,000 passengers, up to 33 routes, 1,500 jobs and more than £800 million from local GDP. That concern has been cemented by a warning from Ryanair’s commercial chief that the company could double its profits per passenger by flying from Cardiff instead, should APD rates be set to zero there. It is therefore clear that the devolution of powers to set air passenger duty will have a profound effect on England’s regional airports, so I am glad that the Conservatives heeded the advice of my colleagues the then shadow Chancellor Ed Balls and my hon. Friends the Members for Streatham (Mr Umunna) and for Barnsley East (Michael Dugher) when they wrote to the Government in September last year, calling on the Treasury to start work on a mechanism to prevent English regional airports from being disadvantaged by devolution to Scotland or anywhere else.
I welcome the Government’s publication of a discussion paper outlining three possible options for tackling the issues affecting our regional airports. I have a few specific concerns about the consultation, on which I am sure the Minister will be able to put me at ease, but first I ask the Minister for an update on the progress of the consultation as a whole. It is my understanding that the closing date for submissions was 8 September, but as yet there has been no published evidence and no conclusions from the Government. Will the Minister say when the Government’s response will be published? More specifically, one solution discussed in the paper is to devolve the power to set rates of air passenger duty to local or combined authorities, either partially or fully. That seems to have implications for our compliance with EU state aid rules. The Labour party supports reform of the EU state aid rules, which would be a much better subject for renegotiation that those chosen by the Prime Minister. None the less, the current rules will apply.
One problem is that the Government cannot vary national tax rates in a way that is more favourable to specific regions. For that reason funding for the relevant local authority would be reduced by the full value of air passenger duty receipts in that area. HMRC research indicates that full devolution to a local authority containing one medium-sized airport would require a staggering reduction in funding of £45 million a year. The point of devolving the powers is to allow regional airports to avoid undercutting by rivals. Can the Minister confirm that under that option a local authority that took that course would receive no extra funding from central Government and would have to deal with a cut of £45 million? He will understand our concern that even the devolution package the Chancellor proposes will not contain much in the way of revenue-raising powers, nor anything like the scope that the devolved Administrations have to make savings elsewhere. Also, does he share my concern that if local authorities are able to set their own levels of APD, it will start a race to the bottom, which, taken to its logical conclusion, would result in an overall loss to the Treasury of £3.2 billion?
Alan Brown
The hon. Lady talks about a race to the bottom and says that different regional airports cutting APD could result in a net decrease overall. Does that not run contrary to the argument I have just been making, which is that cutting APD increases passenger numbers, jobs and revenue? Does she therefore agree that her argument could be flawed?
Rebecca Long Bailey
I thank the hon. Gentleman for making that important point. Hopefully, when the Minister responds about the progress of the report, he will be able to shed some light on those issues specifically.
The third option outlined in the discussion paper is to provide aid to regional airports that will be particularly affected by the devolution of APD, but I am particularly concerned that that would do little to neutralise the effects at the airports that will feel the greatest impact. Airports such as Manchester and Newcastle would be too large to be eligible for such aid under the proposal, so the measure would be ineffective in tackling the problem where doing so will have the biggest impact. Furthermore, providing direct aid has an obvious fiscal implication for the Exchequer, so it would be helpful to clarify whether that would be provided by the Treasury or would again involve corresponding cuts to other local authority funding.
Finally, it would be helpful if the Minister touched on the environmental implications of air passenger duty generally. I have had a number of queries regarding that, particularly from my own constituents. Aviation is, of course, covered by the EU emissions trading scheme, and we anticipate that the fifth carbon budget will address the sector later this year, but it would be helpful if he were to outline how the proposals under consideration will interact with our obligation to decarbonise, especially if we are moving towards little or no APD, and how a devolved settlement will work alongside nationally set targets.
In conclusion, there is a degree of consensus that this matter must be addressed urgently, and we welcome both the Government’s consultation and today’s debate. There are a number of points on which we would welcome further clarification, and I look forward to hearing the Minister’s response.
Mr Gauke
My right hon. Friend anticipates the response that I would generally make, as Treasury Ministers are required to do fairly regularly, regarding requests for tax reductions or spending increases. I cannot add to what I have previously said about the review. We will respond in due course. This is a detailed and complex area. One thing that has emerged from the debate is the fact that there are complexities, and that unintended consequences can result from pursuing certain policies, so we wish to consider the evidence carefully. We are in the process of doing so, and we will respond in due course to the points raised in the consultation. A number of options have been set out this afternoon and, although the consultation is closed, we will want to look closely at the contributions to the debate to develop our thinking on the matter.
Rebecca Long Bailey
I refer the Minister back to his comment about my hon. Friend the Member for Wolverhampton South West (Rob Marris) mentioning in a previous debate that he would be in favour of increasing APD. As has been highlighted by many of the contributions today, we are now working in a different economic landscape in light of the fact that control over APD has been devolved to Scotland. We need to assess the economic impact of APD across the regions, because the playing field is not level. I hope that the Minister will heed my comments in that regard.
Mr Gauke
I certainly understand the point that the hon. Lady is making. To be fair, the hon. Member for Wolverhampton South West made his remarks in June, and I appreciate that that was before he was on the Front Bench. It is a bad habit of Government Front Benchers to point out remarks made by Opposition Front Benchers before they were appointed to the Front Bench, or even selected to be on the Front Bench.
We have recognised the potential impacts of APD devolution, and we are conducting a review to make sure that other cities and regions do not lose out. We are listening to interested parties and we will set out the Government’s next steps in due course. The Government have a long-term economic plan for the great nations and regions of this country, which clearly includes the west midlands. The Government are giving local people more control over the decisions that affect them and strengthening the UK economy as a whole.
Tax Credits (Working Families)
Rebecca Long Bailey Excerpts(10 years, 7 months ago)
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Ian Blackford
I will make some progress and then I will give way.
The SNP firmly believes that we need to do far more to tackle poverty, and addressing inequalities is at the heart of the Scottish Government’s programme for Scotland. We challenge the UK Government to commit to a more ambitious rise in the minimum wage, and to follow the Scottish Government’s lead in paying all staff the living wage.
The UK Government have already cut tax credits. In 2012, the eligibility threshold for child tax credit changed from a family income of £41,000 to £26,000 for lone parents and to £32,000 for families with two children. The number of hours that couples with children had to work in order to be eligible for working tax credit went up from 16 hours a week to 24, with one parent having to work at least 16 hours. As a result of those changes, 11,370 Scottish families lost working tax credits worth up to £3,870 per year and 73,300 Scottish families lost child tax credits worth about £545 per year.
More than 500,000 children in Scotland benefit from tax credits. Two thirds of the £2 billion expenditure on tax credits in 2013-14 went to low-income families with children; only 5% went to households without children. That is why we are alarmed. Any removal of tax credits will clearly lead to an increase in child poverty. It is simply inhumane to consider such a move.
In a speech last week, which was widely interpreted as a statement of intent to gut tax credits, the Prime Minister said:
“There is what I would call a merry-go-round. People working on the minimum wage having that money taxed by the government and then the government giving them that money back—and more—in welfare. Again, it’s dealing with the symptoms of the problem: topping up low pay rather than extending the drivers of opportunity—helping to create well paid jobs in the first place.”
Those comments suggest that the Tories are planning to target child tax credits and working tax credits, which provide support to low-income working people.
Although we agree that we need to take urgent action to tackle low pay and raise wages, removing the vital support that tax credits give cannot be the answer. The SNP has set out a range of policies that aim to boost low incomes and drive wage growth. We have proposed raising the minimum wage to £8.70 by 2020, raising the incomes of the lowest-paid in our society and reducing dependence on tax credits.
The Scottish Government are the first living wage-accredited Government in the UK, and we are actively promoting the living wage by encouraging companies to sign up to our Scottish business pledge. We challenge the UK Government to follow suit and guarantee that all their staff will be paid the living wage.
We want to see a £600 increase in the work allowance of universal credit, which determines when people entering work begin to have their benefits reduced. That would support people on low incomes and boost the income of a worker who receives universal credit by £390.
Removing much need financial support for those on low incomes, in the form of tax credits, simply cannot help make work pay. The SNP wants to make work pay, but we must do so by raising incomes and tackling low pay.
Rebecca Long Bailey (Salford and Eccles) (Lab)
The problem with the Government’s suggestion that cutting tax credits will lead to higher pay is that the labour market is weighted in favour of the employer, rather than the worker. The only way to restore wage growth across the board, especially in the private sector, is through the expansion of collective bargaining. We simply cannot have wage growth in a country where the erosion of trade union rights is right at the top of the Tory agenda. The Government are doing the exact opposite of what they intend, which is to get people back to work and on decent pay—
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. Order! Honestly, we must have short interventions. I want everybody to get to speak. Interventions are not meant to be speeches. We have to help each other today because a lot of people wish to speak. The shorter the interventions, the more people we will get through.